Nigeria’s real household consumption as a proportion of Gross Domestic Product (GDP) has risen to 76 percent in 2021, the highest level since 2010, a new report from FBNQuest states.
According to the report, the surge has accelerated economic recovery amid the COVID-19 pandemic.
“This recovery was driven by rapid consumer demand and industry margins benefitting from higher product prices by Fast Moving Consumer Goods (FMCG) companies,” the report stated.
It also added that the highest level (72 percent) since 2010 indicates a fast rise in household expenditure on food, home & personal care items, and durable goods.
Household final consumption consists of the expenditure incurred by resident households on individual consumption goods and services. It accounts for the largest share of real GDP at market prices.
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According to the 2021 H1 Consumption report by the National Bureau of Statistics (NBS), household consumption rose 13.7 percent to N54.8 trillion in the first half of 2021 compared to N48.2 trillion in H1 2020.
Although inflation has been declining for eight straight months, at 15.44 percent in November 2021, most Nigerians are yet to feel the impact on the prices of goods and services.
“Currently, the average Nigerian consumer is worse off, with a contracted spending wallet due to high food inflation, and generally frailer real income levels,” analysts at FBNQuest said.
Similarly, Ayodeji Ebo, head – retail investment, Chapel Hill Denham said the increase in household spending is a signal that people are spending more as a result of an increase in prices of goods and services not because they are earning more.
The report also highlighted that across the coverage companies, cumulative turnover in the first nine months of 2021 rose by 34.6 percent year on year, aided by strong consumer demand and price increases by FMCGs across popular portfolio products.
“However, high-cost inflation, insecurity in northern Nigeria and global supply challenges compressed the cumulative gross margin of our coverage companies to 2.1 percent in the first nine months of 2o21,” It added.
In 2022, analysts at FBNQuest expect a few factors to drive the performance of the consumer goods industry. One of the things expected is pressures on the food basket to persist.
“We believe industry competition, supply chain disruptions and insecurity will trigger price adjustments. Secondly, we expect that industry volume recovery will be sustained especially over H1’22, analysts stated,” analysts said.
They further added that this will be achieved via different strategies including further sachatisation. “Thirdly, we anticipate increased CAPEX to keep in touch with competition as well as new M&A announcements and capital raising activity.”
